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Chapter 3 on Entrepreneurship
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Chapter 3 on Entrepreneurship

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  • 1. Forms of Business Organization, Regulation & Business Support System © KL Metropolitan University College
  • 2. Types of Business Organization in Malaysia
    • All types of business by law must be registered. The three Acts that govern business are:
    • The Business Registration Act 1956 (Amendment 1978).
    • Procedures of Business Registration Act 1957
    • Company Act 1965
  • 3. Types of Business Organization
    • The following are types of business that operate in Malaysia:
      • Sole Proprietorship OR Sole Trader.
      • Partnership
        • Ordinary Partnership or Unlimited Partnership.
        • Limited Partnership
      • Company – Private & Public Company
  • 4.
    • Company Act 1965
      • According to Company Act 1965, an investor or prospector can form three types of companies.
        • Limited Company by Guarantee
        • Limited Company by Share
          • Private Limited Company ( Sdn. Bhd.)
          • Public Limited Company (Berhad)
          • Foreign Owned Company ( Pvt. Ltd.)
          • Unlimited Company
    Types of Business Organization
  • 5. Sole Proprietorship/Sole Trader
    • Formed under the Business Act 1956
      • This type of business is owned by an individual or sole person.
      • Has a simple business structure
      • Some sole trader can operate as big business, e.g. Family run business.
        • E.g. Kamdar Departmental Store was sole trader for long time until it turn into private limited company ( Sdn. Bhd.)
      • Example of Sole trader – tailor, Beauty Saloon, restaurants, launderettes (dobi), mini market etc.
  • 6. Sole Proprietorship
    • Advantages
      • Easy to manage the business.
      • All decision made by the owner- manager.
      • Low start up capital, no heavy investment.
      • Flexibility in operation.
      • The Sole trader can act quickly with a degree of flexibility.
  • 7.
    • Advantages
      • Easy to form and dissolve (bubarkan) with minimum formalities.
      • Nobody shares the rewards of the business, all profit will go to the owner.
      • Subject to less government rules and regulation.
      • The owner – manager has to pay income tax based on total profit earned to LHDN ( Inland Revenue Board, M’sia)
    Sole Proprietorship
  • 8.
    • Disadvantages
      • Limited source of capital
        • Lack of capital to expand the business further.
      • The liability is unlimited
        • The owner- manager will be liable to settle all debts outstanding.
        • Failing which all assets will be ceased by court order to be sold, and cash generated will used to pay all outstanding creditors.
    Sole Proprietorship
  • 9.
    • Disadvantages
      • The future development of the business is limited.
        • Lot depends on the managerial capability of the owner and physical health.
      • The life span of the business depends upon the age of the owner and how efficiently he manages the business.
      • He is of ill health or passes away the business continuation is disrupted.
      • If he choose an heir (successor) to the business, then the business has to be reregistered.
    Sole Proprietorship
  • 10. Partnership
    • A partnership is a legal business entity with two or more partners.
    • In this type of business, a person forms a partnership (kongsian)
    • A partnership business has to be registered under the Business Registration Act 1956
  • 11. Partnership
    • A partnership normally should consist of minimum of 2 person but not exceeding 20 persons.
    • But exception in the case of professionals ( lawyers, doctors and engineers etc.) is the members could number up to 50 persons.
  • 12.
    • Advantages
      • Easy to set up and operate – less formalities.
      • Easier to secure financial assistance from financial institutions.
      • Equity can be increased from existing partners.
      • Business risks can be less because risk is borne by all existing partners.
      • The responsibility of managing and overseeing the business can be handled by all partners.
      • Ideas, talents and skills can be pooled together from partners for better management.
      • Income tax is not imposed on the partnership business but instead on the individual partners.
    Partnership – Advantages & Disadvantages
  • 13.
    • Disadvantages
      • Business liabilities are unlimited.
        • Personal assets can be seized by court order since no distinction between personal & business assets.
      • The life span (jangka hayat) of the partnership business depends on the life spans of the business.
      • If partner declared bankrupt, dies or become insane business has to be dissolved.
      • If a Letter of Agreement as per Partnership Act 1961 is not made members may resort to mismanage or be unethical in conducting their business in the partnership.
      • Difference of opinion and conflict may lead to breakup of the partnership.
    Partnership – Advantages & Disadvantages
  • 14. Contract Agreement
    • It is necessary for the business to have some kind of Contract or Partnership Agreement to minimize any problems that may arise.
    • The Business Registration Act 1956 does not state that the formation of a partnership business must have a written agreement.
  • 15. Contract Agreement
    • Should an agreement arises what should be the contents?
      • The Contents are as follows:
        • Name of the business
        • The duration of the partnership
        • Agreement as the partnership status once the partner/s passes away or withdraws from the partnership.
        • The name of the individuals involved in managing the partnership.
        • The accounts of the business.
        • The structure of ownership i.e. the contribution made by individual partners.
        • The rights and obligation of the business partners
        • What are the properties that are considered as business assets to distinguish from personal assets.
  • 16. Partnership Act 1961
    • According to Sect 26 & 27 of the above act:
      • Profit & Loss are to be shared equally.
      • No interest is payable on a partner’s capital
      • Partners are required to participate actively in the business.
      • No partner is entitled for salary for work contribution done for the partnership.
      • Partner’s should be paid based on their contribution.
  • 17. Partnership Act 1961
      • Daily routine matters can be decided by the majority of the partners, but major changes require the support of all partners.
      • Partner may choose not to be partner any longer if all partners have agreed.
      • If all partners agree a new partner can be brought to replace the old partner.
      • All business accounts books need to ket in the business premises.
      • Partners have the right to check the books of the company as when needed.
  • 18. Private Limited Company
    • A private limited company (Syarikat Sendirian Berhad) is one of the major two business entity set up under the Companies Act 1965 and its subsequent amendments.
    • The other being the Public Limited Company (XYZ Berhad) which involves a major exercise which needs the approval of the Suruhanjaya Syarikat Malaysia (Companies Commission of Malaysia) and Securities Commission.
  • 19. Private Limited Company
    • The Characteristics of a Private Limited Company.
      • Right & Responsibility
        • A company has a specific right & responsibility. It can buy assets under it on name.
        • A company can also take legal action and face legal action under its own name.
          • Life Span of a company is not dependent upon the death or resignation of its members.
  • 20. Private Limited Company
        • Liabilities
          • The liabilities of the members in a company are limited to the total share contributed to the company’s capital. Personal assets of shareholders are not affected if the company goes bust or winds up.
        • Membership
          • A company must have at least two members who are of Malaysian nationality. These two members of the company will appoint the remaining members of the Board of Directors.
      • Directors will manage the business operation in accordance with the Companies Act 1965.
  • 21. The Private Limited Company Terms & Conditions
    • The number of members does not exceed 50 shareholders
  • 22.